The Rise of India has been illustrated recently in Europe with the acquisition of Arcelor by Mittal Group, which at that time had taken the financial and political circles by surprise. India is one of the components of the BRIC (as well as China, Brazil and Russia).
There are several reasons for foreign investors to invest in the stock market of India.
• The economic dynamism of India (8% GDP growth in 2010),
• Its development potential to cater to a large population (1.15 billion people),
• Economical BPO services provided by India to world and are encouraged by the government,
These reasons make it a serious business for any foreign investor to invest in the stock market of India. But before embarking on investment, it is important to ask the right questions and gain basic knowledge on emerging stock markets like India.
Is it the paradise which analysts speak?
The main award of India to the population of this world is BSE (Bombay Stock Exchange). BSE is the oldest stock exchange in Asia. BSE was founded in 1875 under East India Company. It is important to note that if one will invest in the stock market of India he/she will be exposed to currency risk, but this is common if you will invest in the stock market anywhere outside euro-zone.
Illustration: If you invested in a tracker on the Bombay stock exchange, say one year, the tracker gains 20% at the same time, the rupiah lost 10% against the Euro. Your actual performance will be in Euros only 10% (obviously the mechanism works in two directions).
What is the trend in the Sensex (BSE Index) for lat 2 years?
-Currency: Rupee (INR) 1.00 EUR Euro = 57.0724 INR
-Number of Listed Companies: 4900 (Year 2009)
-Total Market Capitalization: 1028 billion in the month of February 2010 is the 7th place in terms of world stock market capitalization. For the record, the first 6 places worldwide as the New York Stock Exchange (U.S. $ 9570 billion), Tokyo, Shanghai, Nasdaq, Euronext and London (2200 billion USD).
- The main index of the BSE Sensex has moved form 1000 levels in 1991 to 3250 in late 2001 and over 17,000 levels today.
Major composition of the SENSEX includes the following:
The sectors most represented in terms of market capitalization are: oil and gas (14%), energy (10.5%), public sector (28%) and information technology (11%).
How to invest in the stock market of India?
1) Stock Exchange India: The Indian values live
The stock picking actions are not apparent, the major burden of taxation (particularly as regards dividends) and all combined with high volatility, it is advisable to invest in the stock market of India by pooling risks using mutual funds or ETFs